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Child-Proofing Your Kid's Fiscal Education

When high-schoolers are asked where they've learned about managing money, overwhelming numbers of them say "at home."

But how good are the lessons at your house? Is the only education they get available when you and your spouse are throwing small strips of paper around on -- this year, anyway -- April 17, hoping everything adds up in time for you to make that mad dash to the post office?

Or do the kids think that money grows not on trees, but on rubber plants because of all the bounced checks they hear about?

Do they learn that money is not a focus of responsibility but of shouting matches and that "paying the bills" becomes a monthly time known as the "fear factor"?

To help kids learn to handle money, parents have to set a good example and make use of teachable moments to explain their behavior. From paying bills to using credit cards, days are filled with opportunities for parents to launch conversations about using cash.

"When it comes to helping their kids learn about making good money decisions, parents have much more influence than they realize," according to Meridee Maynard, senior vice president of life products for Northwestern Mutual. "And it's really never too early to get started -- even today's preschoolers know what money is. Plus, there are lots of lessons to be learned about money and its uses before kids get to the impressionable teenage years."

In 2006, teens spent $195 billion. While teens have proven they can spend, their understanding of money is severely limited. Every other year, Jump$tart Coalition for Personal Financial Literacy tests the nation's 12th-graders on the basics of personal finance.

In test after test, students have averaged a failing grade.

The Jump$tart scores are just another sign that parents have to talk to kids about managing money. The lessons should start early and build on each other.

Indeed, this month may be one of the best to get started since April is celebrated as Financial Literacy Month, a fact Jump$tart will commemorate with a meeting in Washington, D.C., on Tuesday, April 24.

Says Maynard: "Even the most mundane activities can provide an opportunity for short, but meaningful, money lessons. Kids can help with the grocery shopping so they get an idea of what their favorite items cost."

What better way to show them than by putting their money where their mouth is: "A trip down the snack aisle can spark a lesson about brand-name versus generic prices," adds the Northwestern Mutual executive.

To get additional practical -- and fun -- ideas, check out his organization's newly redesigned Web site for teaching kids about money by going to: www.themint.org. The site helps families begin and continue the money conversation with such entries as:

· Learning and Earning;

· Starting Salaries;

· Decoding Your Paycheck;

· Be Your Own Boss;

· Take the Entrepreneur Challenge.

There are lots of interactive pages, along with a parents' section to help create teachable moments.

Here are just a few highlights:

· A 401 (kids) program. Parents can pledge to "match" any money a child saves. Every two weeks, parent and child can sit down and count the savings to see that money grows, and that saving can be fun.

· Four banks, not one. Here's an idea more effective than a single-slotted piggy bank. With four banks, kids can separate their money by goals: a bank for spending, saving, investing and donating. It's as easy as finding four plastic jars and labeling them. Younger kids can decorate the jars with pictures to keep the goal of each bank in mind.

· Shopping smart together. When kids are young, parents should try to show youngsters ways to stretch their dollars: choosing alternatives to designer brands, buying on sale but not on impulse, judging quality, recognizing gimmicks and making good decisions.

· Modeling restraint. Parents who don't head to the mall for every big sale teach the difference between needs and wants. Parents who explain why they cannot buy that new flat-screen television introduce the topic of thoughtful spending. Then the lesson can be taken to the next level: unplanned or impulse purchases undermine the family budget.

· Money "show-and-tell." Bill-paying time is a great time to talk about the cost of living. Here's how: A parent chooses a group of bills to be paid. Using cash or play money, the parent stacks them in all denominations on the kitchen table to pay the bills. As each bill is paid, the parent removes money from the stacks and keeps a running total. It's a great exercise that makes the point visually and dramatically.

Lessons in money management don't need to be complex. By keeping it simple, kids can reap the rewards of being money smart -- something that will pay dividends for years to come.